Another RGST meeting deadlocked

Sindh refuses to grant the Federal Board of Revenue taxation rights on seven services.

ISLAMABAD: The deadlock between the federation and provinces regarding the implementation of the reformed general sales tax (RGST) regime continued on Tuesday as another meeting ended inconclusively. The meeting of the National Finance Commission’s (NFC’s) technical committee on RGST was headed by Secretary for Finance Salman Siddique. The meeting was attended by representatives from all provinces and by the chairman of the Federal Board of Revenue (FBR), Sohail Ahmed.

Sindh did not move from its original stance of refusing to surrender taxation of seven services, which require some input tax adjustment, to the federation. The next meeting of the committee is scheduled for Friday.

Another meeting will be held on Thursday to discuss provinces’ recommendations and reservations regarding the draft RGST bill. The draft had earlier been submitted to the provinces for review.

According to sources, all provinces, with the exception of Sindh, have agreed to allow taxation on stock brokers, commission agents, under-writers, studios, shipping agents, customs agents and courier services to be shifted under the jurisdiction of the FBR. Sources indicated that taxation on more than a hundred services has been allocated amongst the federation and the provinces but these final seven services have formed a wedge between Sindh and the federation. Sindh has claimed that it has demonstrated considerable flexibility in allowing the FBR taxation rights on some services but the province claims that it cannot concede its position further, said sources adding that, Sindh claims that input tax adjustment on these seven services is between 0.1 per cent and 1 per cent, which is minute. It is on this ground that the province will not concede its position and wants to collect taxes on these services itself.

Earlier, the FBR had sent a copy of a draft of the RGST bill to the provinces for critique and review. The provinces’ recommendations and reviews are due to be discussed and addressed in a meeting on Thursday this week. According to sources, Sindh has expressed its qualms about the draft in the shape of a note containing 30 points. The qualms are mostly of a legal nature.

Published in The Express Tribune, October 27^th, 2010.